In the last few years, new types of mortgages began to appear, such as the adjustable rate mortgage and the $0 down mortgage among them. Along with these changes, the restrictions became less enforced. Those who may have previously been unable to buy a home were now able to get approved. It seemed a great way to move people toward “The American Dream” faster than ever before. Unfortunately, it was this practice that played such a large part in today’s mortgage crisis. It became clear too late that those who received a mortgage based on new, looser restrictions could not afford them.
Over the past year, lenders have been making up for past mistakes by once again making it harder to receive a mortgage. On top of that, many mortgage insurers, who cover the lender in case of default, have also tightened up their standards. Restricted areas of the country require a higher down payment and a higher credit score to insure a mortgage, and more cities are added all the time. Another more recent change is the inclusion of all paperwork to even be considered for a loan. In the near past, many homeowners were able to receive a loan or have a refinance without showing documentation of income or job history. Today, don’t bother walking in the door without the most recent W-2s and proof of employment. With America’s lenders getting back on track, less people will be approved for home loans. Fortunately, when all standards are met and paperwork ready, they will know it is something they can afford.
You may not know it, but each time you write your mortgage check, the money could actually end up in the hands of an investor halfway across the world. How could this happen? It is called mortgage securitization. Your mortgage could possibly have been broken down and resold to other investors in the form of a mortgage backed security bond. It is estimated that this type of funding makes up for more than half of all the mortgages within the United States.
A mortgage becomes “securitized” when it is pooled together with similar mortgages and then sold in bits as bonds by either government sponsored financial institutions such as Fannie Mae or by private institutions. This type of funding has increased significantly in the last few decades. In 1980, only about 12% of outstanding mortgages were securitized. Now that figure is at 61%, according to Guy Cecala, publisher of Inside Mortgage Finance. It has grown so much in large part to foreign investors preferring a less risky investment. Banks began searching more for mortgages that could be bought and resold as bonds. This has also served to loosen the standards for loans, which has created the current mortgage crisis. As it became clearer that many mortgages had been approved for people who could not afford them, the foreign investors began to shrink away from these bonds. The banks were then stuck with bad mortgages and nothing to do with them. Countrywide and Bear Stearns were both involved in this type of funding. Foreign investors own about 20% of the current securitized bonds currently, with Fannie Mae and Freddie Mac tied at 16% for the remaining bonds.
Texas is one of the highest populated states in the country. The last census states over 23 million people call the Lone Star state home. Within Texas are many metro areas, including Austin. The national economic status remains shaky, but it appears that Texas will continue a strong state economy. Governor Rick Perry has made many changes recently that have already had an effect on the state’s financial system.
Among these changes was the enactment of stricter guidelines for home equity loans. The state currently has one of the lowest foreclosure ratings based on population. It also boasts the most Fortune 500 companies, and is the highest exporting state in the country. Austin is home for many of these companies, keeping the job market steady. The Governor plans to continue to tighten spending with the hope that Texas will stay on the right track. Though not immune to the national issues, Texas has done well throughout this ordeal.
Perry made the decision to prioritize spending when in 2003; the state had managed to create a $10 billion deficit. Since then, it has been Texas lawmakers’ goal to correct this financing problem and keep the state ahead. While the housing market and many retailers have experienced a slowdown during the past year, the state has maintained an economy envied by many others. The unemployment rate remains low, even within individual cities like Austin. More companies continue to move to the state, creating even more jobs. The Texas economy is expected to maintain steady progress.
An October report researched by the Urban Land Institute and Price Waterhouse Coopers has predicted that the housing market will reach its lowest by sometime in 2009. The study also predicts that the market will not really start a rebound until into 2010. This prediction is based on input from over 600 real estate experts. There are several factors that were considered during the research time for this report, including loan practices and investment possibilities.
For 2009, the study recommends investing in urban apartments and warehouses are the strongest investments to make. Medium income families are plenty in urban areas, especially those with mass transit available. The apartment option will provide an almost guaranteed return in investment. Warehousing is needed for many types of industries, keeping this type of commercial property high on the list. Metro areas are expected to excel suburban office spaces, and are considered a safer investment.
A major factor in the recent mortgage crisis has been poor lending practices. The introduction of $0 down loans and adjustable rate mortgages meant that people were buying homes they could not actually afford. After some time, the rates increased dramatically and the owners were forced to sell or go through foreclosure. The study predicts that these financial institutions will try their hardest to clear the books of bad loans, keeping the foreclosure rates high for some time before finally leveling off. Texas as a whole has been able to keep ahead of many other states in regard to economy and the housing market. Businesses still flock to metro areas here. Though Austin did not make it to the Top Ten List for investment potential, both Dallas and Houston did.
Austin has been a city at the top of the list for cities that have embraced the green movement. Many local builders are using sustainable materials to build new homes. Energy efficient appliances are becoming the norm as opposed to upgrades options. Now the movement has moved outside. Many new commercial buildings are including landscape architecture with a green touch. The result is a beautiful place for employees to relax and, in some cases, to work.
The outside of commercial buildings has long been an ignored space. With the new focus on conservation, many businesses have begun to realize that utilizing this otherwise unused space can create a better working environment. Native plants and sustainable materials are being used to make these outdoor settings more eco-friendly. The most notable recent eco-friendly landscaping project in Austin is the Austonian building. When complete the building will include a 17,000 square foot rooftop garden that includes a 75 foot pool with fountains and an energy saving water irrigation system. That system will literally use rainwater to care for its plants. There will also be a dog park and herb garden. Landscape architecture firm, TBG Partners has been called upon to create similar outdoor havens for companies like the Ronald McDonald House and Dell’s Children’s Medical Center.
There is an increasing desire to conserve as much energy as possible and businesses in Austin have stepped up their efforts to lend a helping hand to the environment. As the trend continues to become the norm here, more companies are expected to follow.
It has been a long journey over the past year in regard to the price at the pump. Over the summer, many states were hovering just above or below the $4 mark. People began to carpool more and fill up less. The cars have gotten smaller, and the MPG has gotten larger. Families held off vacations. The cost of fuel made its way into everything we did, and everything we bought. It was no different in Austin.
The most recent gas prices in the Austin and Round Rock area are now right around $2 per gallon. It is a far cry from July, and it is going in the right direction. A barrel of gas over the summer was well above $100, which in turn increased the price at the pumps. Today, a barrel is about $60. This difference could mean a savings of about $125 billion, but for many it is still not enough to make them feel secure.
While gas is going in the right direction, the overall economy is on very shaky legs. The job market in much of the country has become stressed. Many people are concerned for their jobs, and even more are concerned about their retirement. Saving money at the pump is a welcome change, but it has not as of yet changed many people’s outlook. A few years ago, we may have used the money saved to really splurge on the holidays. Today, we are putting it away for later. The price per barrel is expected to decline, and the gas pump signs should continue to go down.
